Russia’s central bank is making it more costly for commercial lenders to have liabilities in what it calls “unfriendly” currencies by raising mandatory reserve requirements for foreign tender such as US dollars and euros.
(Bloomberg) — Russia’s central bank is making it more costly for commercial lenders to have liabilities in what it calls “unfriendly” currencies by raising mandatory reserve requirements for foreign tender such as US dollars and euros.
The monetary authority boosted the amount of money that lenders must set aside as reserves for “unfriendly” currencies to 7.5% while cutting it for others to 5.5%, according to a statement.
The change will go into effect from April 1 and marks the first time that the central bank differentiated the ratios. Previously, the requirement was 7% for all foreign currencies. The ratio for ruble liabilities is 4%.
Authorities in Russia are devising new measures to discourage businesses from using the currencies of its adversaries that imposed sanctions over the Kremlin’s invasion of Ukraine.
The goal of the latest step is “to stimulate the change in the structure of foreign-exchange liabilities of credit institutions in favor of the currencies of friendly countries” and generally allow for the share of foreign currencies to drop further on bank balance sheets, policymakers said in the statement.
The currencies of “friendly” countries, mostly yuan, have made some inroads into the settlement of trade and other parts of Russia’s economy. But the yuan still lags behind the share of dollars and euros on the balance sheets of banks.
Other countries Russia considers friendly include Turkey, India and the United Arab Emirates.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.